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    Question

    A company is offered a trade credit term of "2/10 net

    30" by its supplier. If it doesn't take the discount, what is the annualized cost of forgoing the discount?
    A 18% Correct Answer Incorrect Answer
    B 24% Correct Answer Incorrect Answer
    C 36.7% Correct Answer Incorrect Answer
    D 44.6% Correct Answer Incorrect Answer

    Solution

    Formula: Cost = [Discount / (100 – Discount)] × (360 / (Full Period – Discount Period)) = [2 / 98] × (360 / 20) = 0.0204 × 18 = 36.7%

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